Method and apparatus for a no pre-set spending limit transaction card

ABSTRACT

The present invention provides a method and apparatus for a no pre-set spending limit transaction card with features and attributes of both a credit card and a charge card. The novel method and apparatus uses a card with an overlimit spend feature and an associated communicated line of credit. The card can carry a balance like a credit card and may require that the card user pay down the balance carried forward down to the line of credit subsequent to the end of each billing cycle. When the user has reached or exceeded the communicated line of credit, each subsequent transaction request for a new transaction by the user is evaluated on a case-by-case basis by a process that includes execution an overlimit spend authorization logic or process

FIELD OF THE INVENTION

[0001] The present invention relates generally to financial transactionprocessing systems of purchases made via a transaction card. Moreparticularly, the present invention relates to a method and apparatusfor processing user financial transactions made on a transaction cardthat combines features of a credit card and charge card for purchases ofgoods and/or services where the purchase amount equals or exceeds auser's communicated line of credit.

BACKGROUND OF THE INVENTION

[0002] The use of financial cards such as credit cards, charge cards,debits cards, and automated teller machine (ATM) cards is well known.These cards, which are used by consumers everyday, have many featuresand characteristics which offer flexibility to customers or users. Forexample, credit cards such as VISA®, MasterCard®, and Discover® creditcards typically offer revolving credit with a predetermined line ofcredit amount for each cardholder. Further, customers are able to carrya balance forward from billing cycle to billing cycle. The credit cardcustomer will incur interest charges on the balance carried forward andmust usually make a minimum payment. So long as a customer is carryingout transactions that together with their current credit card balance isless than their communicated line of credit, those transactions aretypically approved. Once the customer's communicated line of credit isexceeded, a customer transaction on that credit card will typically bedenied. The customer will generally have to make a payment to the creditcard company sufficient to bring the credit card balance below thecommunicated line of credit or alternatively request a larger line ofcredit. The same issue will arise later if the line of credit is againexceeded.

[0003] Another type of financial card is a charge card such as cardsissued by American Express. A charge card allows a customer to makepurchases similar to a credit card. Unlike a credit card however, with acharge card, a customer is required to pay off the entire balance of thetransactions or charges made on the charge card at the end of eachbilling cycle. Also, unlike a credit card, a charge card generally doesnot have a communicated line of credit associated with that card forthat customer. A charge card with no preset or variable spending limitassociated with the customer or charge card requires approval orauthorization for each customer transaction on atransaction-by-transaction basis instead of on the basis of a fixedcommunicated line of credit amount. The customer spending limit isdetermined by authorization logic which evaluates the customer's creditat the time of the requested transaction and is typically based on acustomer's spending and payment patterns, credit history, place oftransaction, amount of transaction, and other parameters. The spendingamounts authorized will vary from person to person depending on theirparticular financial characteristics including, among others, the user'spayment and spending patterns and credit history. Further, differentfinancial institutions generally have their own institution specificauthorization or approval logic for their charge cards. However, the endresult is typically the same, certain authorization logic is used todetermine whether a transaction request will be approved or denied.

[0004] The different features of financial transaction cards oftenresult in the need for card user to obtain multiple transaction cards tomeet their financial needs. Multiple transaction cards can becumbersome, bulky and hard to keep track of. Thus, there is a need for anovel transaction card that advantageously combines the various featuresand functions of existing financial cards to more efficiently andconveniently provide for and meet a customers financial needs.

SUMMARY OF THE INVENTION

[0005] The present invention provides a method and apparatus for a nopre-set spending limit transaction card with features and attributes ofboth a credit card and a charge card that can benefit both card usersand card issuers. The novel method and apparatus uses a card with anoverlimit spend feature and an associated communicated line of credit.The card user will be able to carry a balance like a credit card. And,when the user has reached or exceeded a communicated line of credit,each subsequent transaction request for a new transaction by the user isevaluated by the card issuer through an overlimit spend authorizationlogic or process on a transaction-by-transaction basis.

[0006] The method for carrying out a financial transaction using atransaction card comprises the steps of having a transaction cardaccount corresponding to the transaction card with an associated line ofcredit and a transaction card balance of previously authorizedtransaction amounts in a current billing cycle, receiving anauthorization request for a new transaction amount to be charged againstthe transaction card account for payment of goods or services, anddetermining an aggregate amount of the existing transaction card balanceand the new transaction amount. The aggregate amount is then comparedagainst the card's communicated line of credit, and when the aggregateamount is equal to or larger than the associated line of credit,overlimit spend authorization logic is executed to determine a responseon whether the authorization request for the submitted transactionamount will approved or denied.

[0007] It is an object of the present invention to provide a method forproviding an authorization response for a financial transaction requestwhere a user has exceeded a communicated line of credit.

[0008] It is an object of the present invention to provide a method forproviding an authorization response on a case-by-case basis for afinancial transaction request by a user that has exceeded his/hercommunicated line of credit.

[0009] It is an object of the present invention to provide a method forproviding an authorization response for a financial transaction where auser has presented a card where the card account balance has exceeded acommunicated line of credit and where the card is a credit card, chargecard, smart card, bank card, transaction card, access card, or anelectronic commerce card.

[0010] The following drawings and description set forth additionaladvantages and benefits of the invention. More advantages and benefitswill be obvious from the description and may be learned by practice ofthe invention.

BRIEF DESCRIPTION OF THE DRAWINGS

[0011] The present invention may be better understood when read inconnection with the accompanying drawings, of which:

[0012]FIG. 1 depicts a block diagram generally showing an embodiment ofa system for carrying out the no pre-set spending limit method inaccordance with the present invention; and

[0013]FIGS. 2a and 2 b depict an embodiment of the steps to carryout theno pre-set spending limit method in accordance with the presentinvention.

DETAILED DESCRIPTION

[0014]FIG. 1 illustrates an embodiment of a system 100 to carry out theno pre-set spending limit or variable spend limit method in accordancewith the present invention. In the embodiment shown, the system 100comprises a user transaction card 10, a transaction card reader 20, anda transaction computer or processor 30 with access to a customerinformation database 35 and transaction card account 40.

[0015] A customer or transaction card user deciding to make a purchaseof goods and/or services will present his transaction card 10 to themerchant providing the desired goods and services. The card ortransaction card 10 presented could be a new type of card that can beused in the novel method described herein or could be any one ofexisting cards that have been adapted to be used in the embodiment ofthe novel method discussed herein. For example, the card 10 could be atypical credit card, charge card, smart card, bank card, transactioncard, access card, or a type of electronic commerce card. The merchantuses the card reader 20, or other device operable to read informationfrom the transaction card 10. The card reader 20 reads information fromthe card 10 and communicates with an appropriate financial institution50, e.g. a banking system or network associated with the institution 50issuing the transaction card 10.

[0016] The card reader 20 is operatively coupled to the transactioncomputer or processor 30 of the financial institution 50. This may bedone via a dedicated communication line or other means of two waycommunication between the card reader 20 and the transaction computer30. The merchant's card reader 20 submits a transaction request forauthorization or approval of the customer's desired purchasetransaction. The transaction request submitted via the card reader 20 tothe transaction computer or processor 30 may include, among otherinformation, transaction card information, merchant identification,transaction amount, etc.

[0017] Those of skill in the art will readily recognize that although acard reader is shown as the device that communicates with thetransaction processor, other devices may also be substituted. Forexample, a user may in some cases desire to retrieve cash from anautomated teller machine (ATM). In that case, it would be the ATMmachine that would communicate with the transaction processor 30. Otherdevices may be used that can operatively interact with the transactionprocessor 30, internet or web servers, interactive voice response units,graphical user interfaces, dual tone multi frequency generating devices,etc.

[0018] The financial institution 50 can comprise the transactioncomputer or processor 30, already mentioned, a transaction card account40 associated with the particular transaction or user card 10, and acardholder information database 35. The financial institution system 50may also include a customer services component (not shown) that mayoperatively interact with a customer, merchant, or other institution 50components, e.g., the transaction processor 30 or user informationdatabase 35, as necessary in a particular transaction request.

[0019] The transaction computer 30 may be operatively coupled to themerchant card reader 34, the user information database 35 and thetransaction card account 40 associated with the transaction card 10. Thetransaction computer may manipulate and process information received orretrieved from these devices. The transaction computer 30 may beoperatively coupled to the card reader 20 to received and respond totransaction request from a merchant. The transaction computer 30 mayalso be operatively coupled to the cardholder or customer informationdatabase 35 such that cardholder information, for example, customeraddress, credit history, spending patterns, payment patterns, or thelike may be accessed and utilized as necessary to carryout authorizationof merchant transaction requests.

[0020] Additionally, the transaction computer 30 may be operativelycoupled to the transaction card account 40 in such a way that atransaction balance 43 corresponding to the transaction card account 40may be accessed or updated as required. The transaction balance 43 ispreferably an aggregate or sum of previously authorized transactions ina given billing cycle, e.g., in the present monthly billing cycle, forthat transaction card 10 and any outstanding balance, e.g. purchases,finance charges, fees, etc. carried forward from previous cycles. Thetransaction computer 30 also has access to information relating to acommunicated line of credit (LOC) amount 45 associated with a particulartransaction card 10. The communicated line of credit is typically afixed quantity and can be accessed by the transaction processor 30 inresponse to a transaction request. However, the communicated line ofcredit may be a quantity that is updated from time to time by thecomputer processor 30 as dictated by an institution's 50 guidelines.

[0021] In operation, a preferred embodiment of the transaction card 10combines features of a charge card and a credit card in novel ways. Inthis embodiment, the transaction card 10 has an associated communicatedline of credit similar to a credit card and a no pre-set spending limitsimilar to a charge card. The communicated line of credit associatedwith the transaction card 10 allows a customer to carry a transactioncard balance over time in an amount up to the communicated line ofcredit. Interest will be assessed on the customer's balance carriedforward on a billing cycle basis, e.g., a monthly basis. The billingcycle can vary depending on the institution 50 and can be one month, 25days or some other time period chosen by the institution. Once the lineof credit limit associated with the transaction card 10 is reached orexceeded, each approval request for a new transaction above thecommunicated line of credit is preferably evaluated by the card issueror institution issuer 50 on a transaction-by-transaction, orcase-by-case, basis by a process that executes an overlimit spendauthorization logic or process (Shown in FIGS. 2A and 2B). Theauthorization process logic or process, executed by the logictransaction processor 30, evaluates the user's or customer's creditworthiness at the time of the requested transaction. The user's orcustomer's credit worthiness is based on various factors or parametersincluding, among others, current card balance, payment and spendingpatterns, credit history and ratings, customer's standing, etc. Those ofskill in the art will readily appreciate that variable spendauthorization logic or no pre-set spending limit algorithms are widelyused and well known in the financial transaction card industry forresponding to authorization of transaction requests. Differentinstitutions 50 may have institution specific no pre-set spending limitauthorization logic or algorithms that take into account a variety ofcustomer parameters and assign varying importance to those parameters inmaking a determination of whether or not to authorize a submittedtransaction request.

[0022] In an alternate embodiment, the user or customer may be requiredto pay down the revolving credit balance associated with the transactioncard 10 down to the communicated line of credit limit before the PaymentDue Date in order for new transaction amounts equaling or exceeding thecommunicated line of credit to be considered by the transactionprocessor for authorization (e.g., account in good standing). Thetransaction processor 30 can access the user information database 35and/or the customer card account 40 to determine whether the user orcustomer has been paying the transaction card balance down each billingcycle.

[0023] Referring now to FIGS. 2a and 2 b, a preferred embodiment isshown of the steps to carryout the no pre-set spending limit method 200in accordance with the present invention. In steps 206 and 209, thecardholder or user presents the transaction card 10 to the merchant forthe purchase of goods or services. The merchant then uses the cardreader 20 to read the user account information on the user card 10 andto access the transaction computer 30 to obtain authorization orapproval to carry out the point-of-sale transaction for the goods orservices desired by the cardholder.

[0024] In step 212, the transaction computer 30, in communication withthe card reader 20, receives the transaction card 10 information and arequest for authorization or approval of a transaction amount for theservice or goods desired.

[0025] In step 215, the transaction computer first makes a determinationas to whether the card or transaction card presented has an “overlimitspend feature.” In step 218, if the transaction card 10 does not havethe “overlimit spend feature”, then the transaction processor 30 carriesout default authorization procedures specific for the credit card,charge card, or other presented card for approval or denial of thetransaction amount.

[0026] In step 221, the transaction computer 30 has determined that thetransaction card 10 does have the “overlimit spend feature” and willaccess the appropriate cardholder account 40 and user informationdatabase 35 as needed. In particular, the transaction computer 30 willaccess the communicated line of credit amount and the transactionbalance of previously approved transactions associated with thetransaction card 10 received.

[0027] In step 224, the transaction computer 30 will aggregate or sumthe transaction balance of previously approved transactions with thecurrent or new transaction amount requested by the merchant.

[0028] In step 227, the transaction computer 30 will compare thisaggregated figure to the communicated line of credit amount to determinewhether the aggregated figure is equal to or larger than thecommunicated line of credit and whether the card account is in goodstanding.

[0029] In step 229, if the aggregated figure is not equal to or largerthan the communicated line of credit and the account is in goodstanding, the transaction computer 30 will execute normal authorizationprocedures for the card presented, whether a credit card, charge card orother transaction card. In step 236, the transaction computer 30 willthen notify the merchant that the merchant's transaction request hasbeen authorized. In step 239, the transaction computer 30 will updatethe cardholder's information, i.e., update the user information database35 and the transaction balance 43, to reflect the approved transactionbased on the aggregate figure being less than the communicated line ofcredit. The process 200 then proceeds back to step 206 in preparationfor the next customer transaction.

[0030] Alternatively, in step 230, if the aggregated figure is equal toor larger than the communicated line of credit, then the transactioncomputer 30 will execute or carry out an overlimit spend authorizationlogic or algorithm to determine whether the merchant's transactionamount may nevertheless be approved. The approval or denial of themerchant's transaction amount is based on parameters related to thecardholder and authorization logic or algorithm that is specific to thecard issuer 50. For example, an institution 50 may use the cardholderscredit history, past payment and spending patterns, amount of requestedtransaction, standing of member with the institution, risk level oftransaction, etc., in their particular overlimit spend authorizationlogic or algorithm.

[0031] In step 233, the results of the authorization logic carried outby the transaction processor 30 are checked to determine whether thetransaction has been approved or denied. If the transaction is approvedbased on the overlimit authorization logic, the merchant will benotified that the requested transaction request will be approved in Step236. In step 239, the transaction computer 30 will then update thecardholder's information, i.e., update the user information database 35and the transaction balance 43 to reflect the approved transactionamount based on the successful result or outcome of the overlimitauthorization logic. The process 200 then proceeds back to step 206 inpreparation for the next customer transaction.

[0032] Alternatively, in step 233, if the transaction is denied based onthe overlimit authorization logic or algorithm, the merchant will benotified that the requested transaction request will be denied in Step241. In step 244, the transaction computer 30 will update thecardholder's information, i.e., update the user information database 35and the transaction balance 43 to reflect the denied transaction amountbased on the negative result of the overlimit authorization logic. Theprocess 200 then proceeds back to step 206 in preparation for the nextcustomer transaction.

[0033] The invention has been described and illustrated with respect tocertain preferred embodiments by way of example only. Those skilled inthat art will readily recognize that the preferred embodiments may bealtered or amended without departing from the true spirit and scope ofthe invention. Therefore, the invention is not limited to the specificdetails, representative devices, and illustrated examples in thisdescription. The present invention is limited only by the followingclaims and equivalents.

We claim:
 1. A method for carrying out a financial transaction using acard comprising the steps of: (a) having a card account corresponding tosaid card, the card account having an associated line of credit, and acard balance indicative of previously authorized transaction amounts;(b) receiving an authorization request for a new transaction amount tobe charged against said card account for payment of goods or services;(c) determining an aggregate amount of said card balance and newtransaction amount; (d) comparing said aggregate amount against saidline of credit; (e) when said aggregate amount is equal to or largerthan said associated line of credit, executing authorization logic todetermine an authorization response to said authorization request forsaid transaction amount; and (f) when said aggregate amount is less thansaid associated line of credit, approving said authorization requested.2. The method of claim 1, further comprising the step of verifying thatsaid card balance was paid down to said line of credit subsequent to thetermination of a previous billing cycle.
 3. The method of claim 1,wherein said card is a credit card, charge card, smart card, bank card,transaction card, access card or electronic commerce card.
 4. A systemfor executing a financial transaction using a card comprising: (a) acard account corresponding to said card, the card account having anassociated line of credit, and a card balance indicative of previouslyauthorized transaction amounts in a current billing cycle; and (b) atransaction processor coupled to said card account, the transactionprocessor adapted to (i) receive an authorization request for a newtransaction amount to be charged against said card account for paymentof goods or services, (ii) determine an aggregate amount of said cardbalance and new transaction amount, (iii) compare said aggregate amountagainst said line of credit, and (iv) execute authorization logic todetermine an authorization response to said authorization request forsaid transaction amount when said aggregate amount is equal to or largerthan said associated line of credit, and (v) approve said authorizationrequested when said aggregate amount is less than said associated lineof credit.
 5. The system of claim 4, wherein the transaction processoris further adapted to confirm that said card balance was paid down tosaid line of credit subsequent to the termination of a previous billingcycle.
 6. The system of claim 4, wherein said card is a credit card,charge card, smart card, bank card, transaction card, access card orelectronic commerce card.
 7. A method for carrying out a financialtransaction using a card comprising the steps of: (a) generating atransaction request based on information from said card, saidtransaction request comprising a transaction amount for the payment ofsaid goods or services; (b) receiving said transaction request at atransaction processor; (c) at said transaction processor, verifying thatsaid card is associated with a line of credit amount; (d) accessing, viasaid transaction processor, said line of credit amount and a cardbalance of previously approved transactions associated with said card;(e) aggregating said card balance with said transaction amount resultingin an aggregated figure; (f) determining whether said aggregated figureis equal to or larger than said associated line of credit amount; (g)executing authorization logic to determine approval or denial of saidtransaction requests when said aggregated figure is equal to or largerthan said line of credit amount; and (h) responding to said transactionrequest via said transaction computer with an approval or denial of saidtransaction request.
 8. The method of claim 7, further comprising thestep of verifying that said transaction card balance was paid down tosaid line of credit amount subsequent to the termination of a previousbilling cycle.
 9. The method of claim 7, wherein said card is a creditcard, charge card, smart card, bank card, transaction card, access cardor electronic commerce card.